[Viewpoint] Accidents Involving New Modes of Transportation and Insurance Payouts

Jang Deok-jo, Professor at Sogang University School of Law

Mr. A purchased insurance through Company B to prepare for injury or fatal accidents. About seven years after signing the insurance contract, he rented an electric wheel with a handle for commuting purposes. While riding the electric wheel, Mr. A was involved in an accident where he was hit by a following vehicle and ultimately died. Mr. A's bereaved family filed a claim for insurance benefits with Company B, but the insurer refused to pay. The reason for refusal was that operating the electric wheel was expected to significantly increase the risk of accidents, and Mr. A failed to notify the insurer of his use of the electric wheel as required. The relevant clause states, "The policyholder or insured (the insured object) must notify the company in writing without delay and obtain confirmation on the insurance policy if the insured (the insured object) directly uses a two-wheeled motor vehicle or a motorized bicycle after the contract is made."

Recently, a court ruling was issued on this case. The first trial ruled in favor of Mr. A's family, but the second trial ruled in favor of Company B, and the Supreme Court's dismissal of the appeal finalized the decision. As a result, Mr. A's family not only received no insurance payout but also had to bear the litigation costs payable to Company B.

With the emergence of various new modes of transportation such as electric kickboards, electric wheels, Segways, electric bicycles, and electric scooters, this ruling is expected to have a significant impact on our daily lives. This is because unfortunate incidents like this can occur even with insurance that has been held for a lifetime.

Let's take a closer look at the key issues. In summary, the important question is whether Company B only needed to explain the relevant clause that "if the operation of motorized bicycles, etc., is not reported to the insurer, insurance payments will be denied" (the former), or whether it also needed to explain that "electric wheels fall under the category of motorized bicycles" (the latter). Both the first and second trials agreed that Company B explained the former but did not explain the latter. Then, could Mr. A have known that electric wheels fall under "motorized bicycles"? In other words, can an ordinary person like Mr. A understand that if an accident occurs while riding an electric wheel, insurance benefits will be denied?

The judgments of the first and second trials on this matter were completely different. The first trial held that the insurer had a specific and detailed duty to explain that new modes of transportation like electric wheels fall under motorized bicycles and thus are subject to the notification obligation, and that Company B failed to fulfill this duty. Conversely, the second trial ruled that the insurer was not required to explain the meaning or types of motorized bicycles in detail or to specify that electric wheels fall within this category.

The basis for the second trial's ruling was that a license is required to operate an electric wheel and that electric wheels must be ridden on the road, not on sidewalks. However, do people without a driver's license (especially minors who cannot obtain a license) actually obtain a license to ride electric wheels? Are they even aware that they need to obtain a license? Moreover, ordinary bicycles also must be ridden on the road rather than sidewalks, so can road riding be a valid basis?

This ruling highlights the need to widely inform society that there is one more important common knowledge that members of our society should know amid the continuous emergence of new modes of transportation. However, a more fundamental improvement is for insurance companies to clearly define the terms in their policy clauses. Since insurance companies, not consumers, decide on matters affecting insurance premium rates among new modes of transportation, insurers should establish clear regulations. Vaguely using terms like "two-wheeled motor vehicles or motorized bicycles" as is currently done can be criticized as a business strategy to exploit these terms to claim exemption from liability in future accidents involving new modes of transportation.